American Center for Education, Inc. v. Cavnar

• Decision Date: 13 June 1972
• Court: California Court of Appeals Court of Appeals
• Parties: AMERICAN CENTER FOR EDUCATION, a non-profit corporation and Hurst B. Amyx, Plaintiffs and Appellants, v. Samuel M. CAVNAR et al., Defendants and Respondents. Civ. 38356.

Page 575

102 Cal.Rptr. 575

26 Cal.App.3d 26

AMERICAN CENTER FOR EDUCATION, a non-profit corporation and Hurst B. Amyx, Plaintiffs and Appellants, v. Samuel M. CAVNAR et al., Defendants and Respondents.

Civ. 38356.

Court of Appeal, Second District, Division 5, California.

June 13, 1972.

As Modified June 26, 1972.

Hurst B. Amyx, in pro. per.

Simon, Sheridan, Murphy, Thornton & Medvene, Robert E. Hinerfeld, Richard C. Leonard, Los Angeles, for defendants and respondents.

KAUS, Presiding Justice.

The American Center for Education Inc., ('ACE') is a nonprofit corporation incorporated under the laws of the District of Columbia. Its principal office has always been in the County of Los Angeles. Its purpose is to 'conduct research, educational, and implementation programs and projects to safeguard and preserve this Nation's moral, spiritual, economic, political and social concepts.' It enlists the support of all American citizens 'who are bound to each other as brothers in the broad spectrum of American patriotism.'

ACE was incorporated in January 1969. Its first operating board of directors consisted of the plaintiff Amyx, who was also ACE's president, Harry Cartlidge (executive vice president), defendant Cavnar (vice president and treasurer) and defendant Todt (vice president and secretary).

The corporation was financed by a donation in the amount of $500,000.00 from an unidentified 'benefactor.' At the time of the troubles which resulted in this litigation--May, 1970--about $150,000.00 of the initial operating funds were left in ACE's treasury.

ACE's bylaws provide for the election, by its board, of an executive committee which is to exercise the powers of the board between board meetings. Three members of the board constitute a quorum for the transaction of board business. The same number makes a quorum of the executive committee.

At the first board meeting after incorporation Amyx, Cartlidge, Cavnar and Todt were elected members of the executive committee.

In April 1970, Cartlidge resigned all of his offices, which left Amyx, Cavnar and Todt as the only directors and members of the executive committee. The bylaws provide for a maximum of seven directors; however Amyx, Cavnar and Todt were not even able to agree on a replacement for Cartlidge. The question of bringing the board up to its authorized strength of seven apparently never even arose.

Differences between Amyx on one side and Cavnar and Todt on the other, which had been festering for some time, came to a head on May 15, 1970 in Amyx' office. ¹ Todt and Cavnar claim that they convened a meeting of the executive committee for the purpose of removing Amyx from all of his offices, but that Amyx left the room. Cavnar and Todt then voted to remove Amyx as president, director and member of the executive committee and elected the defendant Bob Davies to fill the unexpired term of Amyx as director. Cavnar was elected to replace Amyx as president. Later during the afternoon of May 15, there was a donnybrook at the offices of ACE's bank, where the parties attempted to persuade the manager to recognize their respective claims to the right to dispose of ACE's funds. In connection with this summit meeting the executive committee may or may not have met again to fire Amyx and elect Davies once more. In any event Cavnar, Todt and Davies, as the purported new board, met again at 6:00 p.m. that evening. Cavnar resigned as president and Todt as Secretary. Todt was then elected president, Cavnar treasurer and Davies secretary. Justifiably uncertain about the legality of what had taken place, Todt, Cavnar and Davies then noticed a board meeting for May 25, 1970, 'for the purpose of ratifying certain action by the Executive Committee, including, without limitation, the removal of Hurst B. Amyx as President, Director, and member of the Executive Committee of the Corporation, the action of the Board of Directors at its special meeting, upon waiver of notice, on 15 May 1970, for the election of new officers and directors . . .' Though served with a copy of the notice of the May 25 meeting, Amyx did not attend. The meeting took place and the actions taken on May 15 were duly ratified by Cavnar and Todt, with Davies abstaining.

On June 24, 1970, Amyx sued. ² The complaint is in two causes of action. The first purports to be based on section 2236 et seq. of the Corporations Code. By challenging the election of Davies, it seeks to have the court invalidate the purported ouster of Amyx. The second cause of action sounds in fraud and claims, essentially, that Amyx was ousted as a result of a conspiracy between Cavnar and Todt. The conspirators, by various fraudulent representations, first caused Amyx to procure the resignation of Cartlidge, then staged the allegedly illegal intra-corporate proceedings of May 15 and May 25 in order to get control of the corporation and its assets. The relief demanded by the complaint is a declaration to the effect that Amyx' ouster and Davies' election were illegal, the removal of Cavnar and Todt from all their corporate offices, an accounting to the corporation and ancillary injunctions. A preliminary injunction was sought and supported by various declarations. The defendants demurred, filed motions to strike and for a summary judgment and cross-complained against Amyx. ³ The cross-complaint prays alternatively for an order directing another meeting of ACE's board or the ouster of Amyx from any office with ACE.

After Amyx answered the cross-complaint the pending law and motion matters came on for hearing. Eventually an order was made as follows: 1. The preliminary injunction was denied. 2. The demurrer to the first cause of action was overruled. 3. Defendants' motion for summary judgment was granted as to the first cause of action. 4. Defendants' motion to strike was denied. 5. Defendants' demurrers to the second cause of action were sustained, without prejudice to refiling under a new case number. ⁴

A judgment was then entered. It denied any relief to Amyx, dismissed the second cause of action without prejudice, declared that there was no triable issue with respect to Amyx' first cause of action asserted under section 2236 et seq. of the Corporations Code, that he ceased to occupy any corporate office with ACE on May 25, 1970, and that since his removal Cavnar and Todt continued as officers, Todt as president, Cavnar as treasurer.

It will be noted that the judgment makes no specific provision with respect to the contested election of Davies.

DISCUSSION

There are several reasons why the summary judgment on the first cause of action must be reversed.

Turning first to the validity of the election of Davies, it is apparent that if he was elected, it happened either on May 15, at the first purported meeting of the executive committee in Amyx' office, or on May 25, at the purported board meeting of that day. Defendants do not contend that if the election at the first executive committee meeting of May 15 was invalid, its repetitions at the second executive committee meeting of that day, or at the board meeting that evening were any better.

As far as the May 15 meeting is concerned, it seems clear to us that there is a triable issue of fact on whether or not the executive committee validly met. Amyx' declaration concerning the corporate infighting of that day is to the effect that at about 3:40 p.m. Cavnar and Todt entered his office with two policemen, sat down and that Cavnar said something about a meeting. As soon as Cavnar started speaking, Amyz rose from his chair, said 'just a minute' as he rounded his desk and was out of the room within two seconds. Declarations filed by and on behalf of Cavnar and Todt do not deny this detailed description of what happened, but state generally that there was a meeting.

While we have found no cases with respect to executive committee meetings which started, as it were, out of the blue, such law as there is on the subject concerning directors' meetings is summarized in 2 Fletcher, Cyclopedia of the Law of Private Corporations (perm. ed.) section 422, page 277 as follows:

'A director cannot be trapped into attendance at a directors' meeting, against his will, by the directors going to his office, which was the office of the company, where he left the office in order to break up a quorum as soon as he realized that corporate action was to be taken and a meeting held. (Footnote omitted.) So, to hold that certain directors could form a quorum by coming upon another in a room, or in the street, and, despite the protests of that other, could, by merely declaring the body of persons gathered together to be a meeting, actually give it that complexion, would be illegal. (Footnote omitted.) But this rule does apply where the director not only attends but remains and participates in the proceedings during the entire meeting. (Footnote omitted.)'

Having these principles and the authorities cited in Fletcher in mind, the trial court could not have decided on motion for summary judgment that there was a meeting of the executive committee on May 15. Indeed the declaration in the judgment to the effect that Amyx was ousted as of May 25 supports the conclusion that no such determination was made.

The same reasons which militate against a holding that there is no triable issue on whether or not there was a May 15 meeting of the executive committee that elected Davies, compel a similar holding with respect to the alleged ouster or Amyx on that day.

Moreover, with respect to that issue, there is a more important reason why Amyx could not have been ousted by the executive committee on May 15. ⁵

As we interpret the bylaws of ACE, the one board power which was not delegated to the executive committee was the power to remove duly elected directors.

As far as the articles of incorporation of ACE are concerned, they say nothing about an executive committee. They merely provide that 'any director may be...